There are many situations in which a person or entity (“Payor”) wishes to transfer money to another person or entity (“Payee”). In the simplest situation, the Payor physically transfers cash funds to the Payee. In other situations, the Payor transfers money to the Payee using a check. If the Payee is a merchant, the Payor may use a credit card, debit card, or other portable consumer device by presenting that card or portable consumer device to the merchant.
The process described above suffers from several shortcomings. In cases where payment is made through a written instrument such as a check, the Payee is not guaranteed that the payment instrument is valid (e.g., bounced check). In addition, even if the written instrument is valid or cash is received, the payment still must be deposited by the Payee into a checking or savings account, thus further delaying the availability of the funds in the account for further transactions. Additionally, the Payee will typically have no means for depositing funds received from a Payor directly into an account associated with a credit card, thus requiring a two step process of depositing funds into a banking account, then sending the funds to a credit card account through a means such as writing a check or an account transfer. Physical cards are subject to loss, theft, and fraudulent use.
The process further suffers from the fact that payments can typically only be made through the use of cash or a written instrument, such as a check. In many situations, the Payor may not have sufficient funds to directly pay the amount owed, but will have access to a line of credit, such as from a credit card, from which to pay. It is generally not a straightforward or inexpensive process for a Payee to establish the necessary infrastructure for receiving credit card payments directly. It makes even less sense for a Payee to spend the time and expense to establish such facilities when the number of transactions to be processed is small or possibly even a one-time transaction.
There have been attempts at solving the above mentioned problems. One example of such an attempt is the system offered by PayPal™. That system permits transactions between Payor and Payee. Payments can be sent using Payor's PayPal™ account balance, bank account, or credit card. Payments can be received by Payee only by depositing funds into Payee's PayPal account. If Payee wishes to use the funds to pay off a credit card balance, Payee must request a check or an electronic transfer to a bank account. Only then can Payee use the funds to pay his credit card bill. The funds are retrieved from the Payor's account at a banking or credit card institution, and deposited into an account at the PayPal™ system that is associated with the Payee.
Although the PayPal™ system does solve some of the problems associated with sending and receiving payment, other problems still remain. For example, in order to use the PayPal™ system, a Payee is required to register with the system. This can be a problem for any number of reasons, the simplest being that a Payee may not wish to register for privacy reasons. Additionally, a Payee may only receive funds in their PayPal™ account, and as such is tied to maintaining a financial account at the PayPal™ system. This may be undesirable for any number of reasons, an example of which could be that the PayPal™ account does not provide for an interest rate on funds held that is acceptable to the Payee. In any case, the Payee is locked into receiving his or her funds into their PayPal™ account. Furthermore, although PayPal™ does provide a feature whereby a Payee can manually initiate an electronic transfer of funds from his or her PayPal™ account to a checking or savings account, it does not provide a facility to directly transfer funds, either automatically or manually, to a credit card account. The PayPal™ system typically charges a fee to transfer funds from a credit account. The PayPal™ system further does not provide the same consumer and fraud protection protections as credit and debit cards, and the system does not provide tools for the Payee to conduct risk analysis.
With traditional credit and debit cards, there is no way to transfer funds from one card to another card. With more advanced portable consumer devices (in smart phones and personal digital assistants), there is the problem of securely connecting with, and transferring money to, the intended party. Past efforts to “beam” information from one mobile device to another mobile device pose security and privacy concerns. For example, payment account information might be accidentally sent to the wrong party. Still worse, payment account information might be captured by a fraudster trolling the airwaves for payment account information.
Various methods of connecting mobile devices have been used. For example, Bluetooth can “pair” devices together. However, setting up Bluetooth connections to “pair” devices takes time and can be inconvenient and cumbersome to the customer because a code may be required. Other forms of device-to-device communication also suffer security and privacy problems.
These and other problems are solved by the disclosure of the present invention.